HarperCollins to Acquire Harlequin

News Corp announced on Friday that they are buying Harlequin for $455 million in cash from the Canadian media conglomerate Torstar. The leading romance publisher will retain its independence as division of HarperCollins, News Corp's publishing subsidiary.

Torstar acquired control of Harlequin in 1975 and full ownership in 1981. The romance publisher publishes the work of more than 1,300 authors and releases over 100 titles per month, with approximately 40% revenues coming from books published in languages other than English.

The acquisition will need regulatory approval, including in Canada and the US, and it will also require approval under the Investment Canada Act.

While the press release would have you believe that time are great, it's worth noting that Harlequin's revenues peaked in 2011 ($459) and dropped in both 2012 ($426 million) and 2013 ($398 million). This looks to me like Harlequin is not making the transition to digital as well as some would like.

HarperCollins, on the other hand, has at least been treading water. Their most recent quarterly report showed some growth ($391 million in revenue, up 4% from $377 million). In terms of revenue HC is about 4 times the size of Harlequin, though of course that is spread across many different genres and categories.

Harlequin is also not handling the rise of self-published authors all too well. What I have been hearing is that Harlequin isn't paying enough in royalties to keep their more successful authors from departing for greener pastures, both with other publishers and independent. This is probably reflected in their bottom line; along with SF romance was one of the first genres to go digital and it is one of the genres to benefit the most from the self-publishing revolution as well as the rise of new independent digital publishers.

And given that the lawsuit concerning Harlequin underpaying digital royalties was recently revived by an appeals court, I wonder whether Torstar thought that Harlequin's potential liabilities outweighed its prospects.

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Nate Hoffelder is the founder and editor of The Digital Reader:"I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

2 Comments on HarperCollins to Acquire Harlequin

Harlequin sales have been declining and, since they are heavily dependent on MMPB sales and newcomer authors, the indie ebook revolution hits them both upstream and downstream. And the effects compound: less pbook sales means they have less to offer newcomers to keep them from going indie which means more indie competitors for the authors that choose to go with them, which means less sales… And then there is the lawsuit and the fact that more than a few of their authors have been getting their rights reverted. Apparently their contracts have been geared more towards scamming authors than locking up rights eternally. Which sorta makes sense given their “chew-em-up, spit-em-out” business model. But that model requires a deep and steady stream of newcomers and the anecdotal evidence accumulating suggest the stream is drying up.

At a minimum, they need to up their royalties and get rid of the self-dealing, to get the stream of submissions bsck where they need it, which is something Torstar literally can’t afford.

Which is to say, News corp has a multi-year project on their hands, to get rid of Harlequin’s toxic rep. And that means they need to make the lawsuit go away fast and visibly. Which won’t take long if they’re going to do it.

Poor performance and bad choices in elevating one-hit wonder authors with all their marketing budget rather than on the steady performing authors, requiring less marketing expense has made long-term steady authors with Harlequin unhappy with Harlequin. Harlequin Teen, for instance, is a sore spot of Harlequin with all the bestselling Harlequin adult romance authors go to bury their career. That imprint has the highest marketing expense, yet performs the worse, focusing on marketing one author who has only had one hit. Past twitter and fan forums have shown the bashing of indie and self-published authors from Harlequin fans, where the problem lies not in the insurgence of indie romance but how Harlequin could not provide books as well-loved or competitive as the indie books readers are demanding. It is no wonder Harlequin fell hard and had to sell to a competitor after almost 50 years. The year 2010 was when Harlequin Teen emerged as an imprint. 2011 was when they received more marketing assistance from Harlequin HQ only to heavily market one series from an unknown and unproven author who couldn’t perform with her subsequent series and fell. Harlequin blamed it on indie authors and digital books, not on their own poor judgment.